The Indian stock market has experienced a significant upswing, with the Sensex jumping over 1,200 points in the past two days and the Nifty reclaiming the 25,500 mark. This surge reflects a positive trend, with both indices opening in the green on Thursday. As of today, the BSE Sensex was up by over 300 points, and the Nifty50 was trading above 25,400.

Several factors appear to be contributing to this bullish sentiment.

Positive Q2 Results and Earnings Rebound Expectations: The ongoing Q2 results season has brought positive news for some companies, fueling expectations of a broader earnings recovery. Stock-specific action in response to these results has contributed to the market's upward movement.

Global Cues: Developments in the US market are also playing a role. Declining US 10-year yields and a strengthening rupee suggest that foreign institutional investors (FIIs) may be shifting their focus towards emerging markets like India. Moreover, gains in the US market, spurred by strong quarterly performances from major financial institutions, have set a positive tone for Asian markets.

Potential US-India Trade Deal: Optimism surrounding a potential trade deal between the United States and India is further boosting market confidence. Reports suggest that the US administration is keen on striking a deal with India, especially given the impact of China's actions regarding rare earth magnets. Such a deal could provide a significant boost to Indian exports and create jobs in labor-intensive sectors.

Domestic Macroeconomic Factors: India's robust macroeconomic environment also supports the market rally. The low CPI inflation of 1.54% in September and the possibility of annual inflation declining to 2.6% in FY26 raise the prospect of further rate cuts by the Monetary Policy Committee (MPC). This, in turn, could stimulate rate-sensitive sectors like automobiles, which are already experiencing high demand.

Strong Investor Sentiment and Liquidity: Ahead of Dhanteras and Diwali, the stock market is experiencing strong gains, driven by sustained foreign investment. High liquidity and a buoyant market sentiment suggest that the market can absorb upcoming IPOs.

Sectoral Performance: Almost all sectors are participating in the rally, with Nifty Realty and Nifty Consumer Durables leading the gains. Nifty Auto, FMCG, and Private Bank indices have also shown significant increases.

Expert Opinions: Market observers suggest that declining US 10-year yields as rupee gained suggested foreign institutional investors were shifting focus to emerging markets, including India, potentially influencing domestic market direction in the coming months.

In conclusion, the Indian stock market's recent surge can be attributed to a combination of factors, including positive domestic macroeconomic indicators, encouraging Q2 results, optimism surrounding a potential US-India trade deal, and supportive global cues. The influx of foreign investment and strong investor sentiment further contribute to this bullish trend, suggesting a positive outlook for the near term.